Commodities bounced off lows on Monday after one of the biggest sell-offs since the 2008 financial crisis turned into cautious buying on hopes that Europe would prevent its debt crisis from dragging down the global economy.

Gold and copper earlier lurched lower and Brent crude oil fell to seven-week lows before rebounding and moving into positive territory.

The market has come down a long way, and most of the bad news seems now to be priced in, said Christopher Bellew, an oil broker at Jefferies Bache.

I think that the possibility of a Greek default is being addressed. There is a chance that the market won't fall much further, at least for a while.

Other markets, including world stocks and the euro, gained strength from speculation that Europe was taking steps to stop fallout from any Greek default and that the European Central Bank might cut interest rates.

During Asian trading, U.S. crude fell by nearly $3, silver lost as much as 16 percent and other base and precious metals nosedived as investors scurried for ultimate safe havens such as cash and the dollar.

People are just fearing the worst. We're in a free fall, and there's no one wanting to step in and make a stand, said Citigroup analyst David Thurtell.

OIL ERASES LOSSES

As the trading day moved to Europe, markets gained strength on reports that European leaders were seeking new ways to solve the region's debt problems.

Brent futures for November fell 2.2 percent to a low of $101.66 a barrel but then recovered sharply to reach a high of $105.15, up 1.1 percent.

Brent plunged 7.35 percent last week in its biggest loss since May 6. So far in September, Brent is down 9 percent.

U.S. crude lost 3.4 percent to reach a low of $77.11 but also then recovered into positive territory.

Investors ignored gold's safe-haven status and dumped it along with industrial metals such as copper and silver, putting gold on course for its largest monthly slide in three years.

It shows you that at times of extreme stress, there is not a suitable substitute to liquidity, and although gold is liquid by metal standards in comparison to Treasuries, when you get this kind of flight to cash, then it really is cash that counts, and that means U.S. dollars, said Credit Suisse analyst Tom Kendall.

Gold has fallen by nearly 9 percent in its largest three-day slide since October 2008 and implied volatility has risen to a 2-1/2 year high.

Spot gold tumbled as much as 7.4 percent to a low of $1,534.49 on Monday, its weakest since early July, before reversing direction and paring its losses to less than 2 percent.

After the wild activity, the difference between the intraday high and low ballooned to $128.40, the largest daily price swing on record.

Spot silver dropped as much as 16 percent to $26.04, a level not seen since November 2010, and platinum slid as much as 9 percent before paring losses.

COPPER HITS 14-MONTH LOW

Three-month copper on the London Metal Exchange shed 7.6 percent to $6,800 a tonne, its sharpest fall since October 2008, before rebounding and trimming losses to 1.3 percent by 1300 GMT.

Copper is down 23 percent so far this month, on track for its second consecutive monthly fall. The metal is trading 25 percent lower in the year to date.

Analysts expect to see some bargain-hunting following recent falls, but Chinese buyers are likely to be cautious given recent market volatility. Investors also are expected to sit on the sidelines ahead of a week-long national holiday in China next week.

There will be some buying over the next weeks, but right now considering the national holidays at the beginning of October, I think any buying will be very cautious, said analyst Eugen Weinberg at Commerzbank.

Aluminium fell to its lowest level since mid-September 2010 before recovering to trade 1.2 percent higher.

In agricultural markets, U.S. corn and wheat contracts edged up, regaining some ground after last week's steep setbacks, while soybeans slid to a fresh 10-month low as investors remained wary of commodities.

Cocoa futures recovered to unchanged levels after hitting a one-year low, under pressure from improving crop prospects in West Africa, while raw sugar and arabica coffee rose, consolidating after last week's sell-off.